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Wednesday, 22 April 2009 16:27

HRMC, WestCare to join forces with Carolinas HealthCare

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By Becky Johnson & Julia Merchant • Staff writer

Haywood Regional Medical Center and WestCare announced plans to join forces under a newly created parent company. In addition, they will enter a management agreement with Carolinas HealthCare System, a large hospital system based in Charlotte with 25 hospitals under its wing in North and South Carolina.

“We will gain access to the knowledge and expertise of an organization that has a proven track record of helping hospitals improve their bottom line and grow services in communities,” said Mike Poore, the CEO of Haywood Regional Medical Center.

The decision to enter a partnership with each other and a management contract with Carolinas HealthCare System was approved by unanimous votes by both the HRMC and WestCare boards in separate meetings Monday night (April 20).

The arrangement stops short of a complete merger of HRMC and WestCare. The hospitals will not merge their assets or balance sheets. However, daily operations from a revenue and expense standpoint will be managed jointly.

WestCare CEO Mark Leonard compared the arrangement to the partnership entered into by Harris Regional in Sylva and Swain County Hospital in Bryson City. Both continue to function somewhat independently, although daily affairs are managed as a single unit.

“The two organizations remain separate and district but there was a new parent,” Leonard said.

The primary advantage of a management contract with Carolinas HealthCare is an economy of scale to get better rates and prices on everything from insurance reimbursements to the cost of medical supplies.

“They can go to suppliers whether it is for linens or medical equipment and say, ‘We represented 2,000 or 3,000 beds and we want a better price or we go somewhere else,’” said Dr. Richard Lang, an HRMC radiologist.

Health care conglomerates, often organized under one flagship hospital, are increasingly common. On the other hand, rural hospitals flying solo are increasingly rare. Smaller hospitals struggling to stay relevant in the rapidly changing world of health care are increasingly partnering up.

“I believe this makes really good sense for medical coverage for this section of Western North Carolina, to keep a viable system available to the people here,” said Cliff Stovall, HRMC board member.

HRMC and WestCare will retain autonomy in some areas of operation, but will give up autonomy to the joint parent company in other areas.

“They are going to delegate much of their roles to this (new) board,” Poore said of the current WestCare and HRMC boards.

Exactly how much control would remain with the individual hospitals has yet to be worked out.

“All the details now have to come together,” said Mark Clasby, HRMC board member.

Hammering out the details of both the joint operation between WestCare and HRMC, along with the details of the management contract, could take another six months.

“There is a tremendous amount of work and due diligence that will have to occur,” Leonard said.

WestCare and HRMC will have just one CEO down the road, but neither Leonard nor Poore were concerned about that.

“I think both of our boards have made a brave decision to ensure not only that we keep the services that we have, but that we grow for the future,” Poore said. “It would be selfish of me not to go forward with this because it’s what’s best for the community.”

Other administrative functions, from payroll to purchasing, could also be consolidated, or could even be taken over by Carolinas as part of the management contract.

It is not known yet how much say Carolinas HealthCare Systems will have on the daily operations of the hospital or how much influence on long-range goals and strategies.

“What the trustees and physicians have heard is that Carolinas does not micromanage local leadership and local governance,” Leonard said.

When HRMC first began exploring the prospects of an affiliation with other hospitals, an outright merger was not out of the question. But leaders of the process soon realized there was little to be gained by the loss local control resulting from merger, not even the hoped-for cash infusion to upgrade equipment or expand the hospital.

“During this process, we found out even with a merger there is no cash infusion,” Clasby said.

Retaining autonomy is one reason a management contract was attractive.

“I think that’s one of the things that the board felt strongly about is that it kept control locally and got outside help to improve services,” Poore said. “The management company has really no powers or authority that are not expressly given to it.”

Haywood County Commissioner Mark Swanger said the management contract appears to be the best of both worlds.

“Under the contract, we still retain our independence, but yet we gain many of the benefits that a merger would provide. At this point I think it’s the best of the possibilities,” Swanger said. “I think it will improve healthcare, and I think it will improve the financial health and stability of both WestCare and HRMC.”

WestCare and HRMC said that patients will not be forced to leave their own county to get health care services they currently enjoy at home. Each hospital will still strive to provide the full array of medical care they do now rather than integrate clinical operations, such as cardiologists only operating in Haywood or hip replacements only being done in Sylva.

“I think it is unlikely that we would have that kind of consolidation. Our communities are 26 miles apart. Those kinds of consolidations work when you’re in a very close proximity,” Poore said. “We don’t have any plans to merge services on a local level. I think what would be more likely is that we would work together to create new services.”

That is particularly the case when it comes to highly specialized care, where there could be just one center to serve patients across the counties. Some services are too specialized to offer currently, but the larger patients base that would come with a joint affiliation could help recruit specialties the area doesn’t currently have, Poore said.

Poore says hospital staff, particularly front line staff, will see little if any change in their jobs.

Mission Hospitals in Asheville was the runner up in a quest for a management contract.

“Mission put forward an excellent proposal, but I believe the judgment was that Carolinas has the experience that no other group could match,” Swanger said.

Mission said while it appreciated the opportunity to make a pitch, it was disappointed in the decision.

John Maher, vice president for services at Mission, said that patients in the western counties have a high level of confidence in the health care provided at Mission. During the negotiation process, Mission conducted a survey in the western counties and found that 66 percent of patients preferred Mission over the other entities being considered for a management contract.

Further, Mission’s vision of an integrated comprehensive health system across the region is compromised by the decision to go with Carolinas, Maher said.

Maher also questioned how many jobs may be lost by Carolinas taking over the administrative functions of the hospitals. Those details, of how much Carolinas HealthCare would assume control of, are unknown.

“The language of the operating agreement has not been fashioned yet,” said Gail Rosenberg, spokesperson for Carolinas. “It is going to ba number of weeks before it is as to what pieces and part would be part of that.”

Leonard said he does not expect the referrals of patients to Mission from the western counties to change.

“We have a lot of respect for the folks at Mission, the specialists and sub specialists in Asheville. They do an excellent job for our communities,” Leonard said. Doctors will still have the freedom to refer patients to whomever they pleased, despite Mission not being selected for the affiliation.

“I don’t see the referral patterns changing whatsoever. Mission is a very excellent hospital,” Lang agreed.

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